When can I retire?

[Cougr67]

I know this is a common question on this forum but I will try to add a twist. I know how much money I want and I know how to get there. I am just not confident in how long it will take me to get there

My current situation is:
46 Yr old, wife is 44
married
no debt (house and cars paid for)
Approx 525K in 401k, Roth IRA's 403b, Simple IRA etc
Approx 150K in taxable accounts mostly stocks
We currently add 55K a year into our retirement funds,
My goal is to have 70k a year spendable income during retirement
IRS estimates 18k each (36K total yr) starting at 62

In your opinion, what year can I safely retire?

 

[bizlady]

Social security gives you your esitmate- not the IRS.

IS your 70k in living expenses to include all taxes and health insurance?

Any children?

Any pensions?

Go to firecalc.com and start running some numbers....

 

[Cougr67]

70K includes all expenses after taxes.

no pensions, children are already accounted for.....

I have run numbers in Firecalc but there are many variables. I have a year in mind but want others opinions with out first revealing my findings/goals

 

[MDJO]

Just a rough calculation - for a draw of 70K per year, using the 4% guideline, you would want to have 1.75M built up to draw on. Social security would be a bonus in this scenario.

If you assume 18K from SS, then you want to draw approx 50000 per year, and you could go with 1.25M.

 

[Independent]

I'll bite - your age 52.

Your current $675k, with an addition $55k per year, will accrue to almost $1.3 million by then (assuming 5% interest). At that point you set aside $396k to fill the SS gap (10 years for you, 12 years for your wife) leaving $880k to fund periodic withdrawals.

4% withdrawals on $880k is $35k. Add that to the $36k SS and you get $71k.

There are lots of variables here - your exact tax situation, whether the 5% interest in accumulation and 0% interest in the SS bridge are appropriate, whether you feel 4% SWR is really "safe" for a retirement at age 52, whether you're talking calendar years or years of age, etc. But this is good enough given that you've got six years to sharpen the pencil.

 

[plex]

Sometime between 53 and 54, there would still be a substantial amount of time where you are drawing down the retirement funds significantly, 12 and 14 years respectively. Assuming you have a balanced portfolio. Also assuming health insurance changes do not raise living costs, or is at least offset by other changes.

 

[LOL!]

Your $70K is after taxes. Add $5K for the taxes you might pay (could be more, could be less), so you might need $75K a year in withdrawals. So you can probably retire around 55, but will have to go back to work at 58.

 

[Cougr67]

The goal I have in my head is 52. I realize that is quite aggressive but what the heck, it gives me something to work for!!

There are a couple of factors that will help me though. I own my house worth about 250K and my wife owns a small business that we should be able to get some income from after retirement. I don't use these things in my planning calculations though, instead I leave them out and figure they are a buffer if my retirement calculations are not accurate.

Thanks for taking the time to verify my calculations!

 

[Midpack]

Just a rough calculation - for a draw of 70K per year, using the 4% guideline, you would want to have 1.75M built up to draw on. Social security would be a bonus in this scenario.

There are lots of variables here - your exact tax situation, whether the 5% interest in accumulation and 0% interest in the SS bridge are appropriate, whether you feel 4% SWR is really "safe" for a retirement at age 52, whether you're talking calendar years or years of age, etc. But this is good enough given that you've got six years to sharpen the pencil.

As Independent alludes to, the 4% guideline is a statistically based "rule of thumb" for a 30 year retirement. Hopefully that would not be the case for anyone at age 52. I've seen several smart people here and elsewhere use 3% (or even less since the almost unprecedented 2008 meltdown) as the practically unlimited duration SWR. I'd rather err on the surplus side than otherwise, retirement is a very long chapter in life, where income recovery is likely more limited. YMMV

 

[chinaco]

If I were planning my FIRE using those parameter, I would use a target of approximately a $2M portfolio (in 2019 $) and plan FIRE around 55 - 57 age range. [$1.5M in present value if I were 55 today]. This is a rough guess and based on a bunch of assumptions that could prove to be inaccurate.

You should do some reading on the topic of retirement planning and use a spreadsheet to create and model your plan.

 

[Bossonova]

According to my calculations you could retire now. Unfortunately your wife would be on the hook until 67. Joking.....

The majority of your money is in 401K etc. To my understanding, that means you would incur a penalty if you dipped into those funds prior to 591/2. The 150 K non tax deferred you have now would be eaten up fairly quickly. It is unclear how much of the 55K year saved is in tax deferred accounts. I am assuming 30K worth. So again the non penalty funds will be a bit light.

To me, it looks like 55 might be a possibility.

 

[rdjrn]

I'm in a somewhat similar situation. 53, married, 4 kids. We have $530,000 in a 401K, another $440,000 in lump sum pension. I also draw a $15,000 annual VA pension (tax free), and at age 60 I'll begin drawing Army Reserve retirement and get TriCare health insurance to supplement my megacorp retiree insurance. Plan to start drawing SS at 62 (estimate $17K per year). I also need about 70K net income to live very comfortably (in the south). I owe $30K on the house, and we don't plan to move after retirement. FireCalc says I'm good to go at 55/56. What do you think??

 

[Independent]

I'm in a somewhat similar situation. 53, married, 4 kids. We have $530,000 in a 401K, another $440,000 in lump sum pension. I also draw a $15,000 annual VA pension (tax free), and at age 60 I'll begin drawing Army Reserve retirement and get TriCare health insurance to supplement my megacorp retiree insurance. Plan to start drawing SS at 62 (estimate $17K per year). I also need about 70K net income to live very comfortably (in the south). I owe $30K on the house, and we don't plan to move after retirement. FireCalc says I'm good to go at 55/56. What do you think??

You didn't mention the Army Reserve retirement amount.

The other question would be the 4 children. Are you planning on $100k of college support for each of them? Will the current $70k spending go down to $40k in a few years because the children are independent (we hope)?

 

[rdjrn]

The Army Reserve amount will be about $9000 per year. I realize the kids education will be expensive, but it looks like I can make as much or more in retirement as I do working. And yes,... the 70K spending is with two car payments, mortgage, and with 4 school aged kids living with us. There should come a day when the mortgage and kids cost will be gone (I hope).

 

[Independent]

The Army Reserve amount will be about $9000 per year. I realize the kids education will be expensive, but it looks like I can make as much or more in retirement as I do working. And yes,... the 70K spending is with two car payments, mortgage, and with 4 school aged kids living with us. There should come a day when the mortgage and kids cost will be gone (I hope).

Sorry for the slow response.

I can do a back-of-the-envelope calc to get a gut feel on FireCalc. The 55/56 looks plausible, it's all about the cushion.

I'd start the math by assuming you'll retire today. You've got $970k in current savings. Assign $30k to pay off the mortgage, and $216k to provide a bridge until Army Reserve pension and SS start. (I'm figuring the $216k provides 7 years at $26k followed by 2 years at $17k.) Adding $26k to your current $15k pension gives you a base income of $41k for each year in the future, leaving $29k to be funded by withdrawals from savings.

So you'd have $970k - $30k - $216k = $724k to provide annual income at some periodic withdrawal rate. Using 4% gives $29k which exactly hits the $70k target.

But, the $70k target includes mortgage, and the method above set aside enough to pay off the mortgage, so there's a cushion equal to the mortgage payments.

Most people here think that it's too risky to retire if you really need 4% inflation adjusted in every year of retirement because the market has been known to go down sharply. If you've got FireCalc all set up, it me be good to look at the detail results (click the first box in the "Investigate" tab, then find the Excel link on the "Results" tab) to see the year-by-year portfolio balances and imagine living through the poorer years.

When I do the same math for retirement at 56, assuming your assets grow at 3% real, I see that 4% gives $35k withdrawals to add to the $41k base. That provides some cushion.

I think your biggest spending unkown is the kids. Suppose your current $70k includes $7.5k per year per child that goes away as each one leaves home. So you and your spouse are currently living on $40k per year (including house). That would mean pensions/SS will cover the two of you long term and you could (very theoretically) spend most of your savings on the children. That would give you a lot of room, but it assumes you two can really be comfortable living on just $40k. At any rate, I think I'd want to get a handle on what spending will go down when the kids leave home and talk to my spouse about how much we plan to spend on education and whatever else (weddings?) as the children move on. Those thoughts might swing your plans significantly one way or the other.

 

[rdjrn]

Great information, thanks! It's a good feeling knowing that if I lost my job today we would probably be okay. However,.. just to add a little "cushion", maybe I'll think about retiring at 57.

I would like opinions on another topic. Since my wife is 12 years younger than I am, would it be prudent for me to consider taking an annuity instead of the lump sum amount ($440K)? I believe this lump sum amount will be close to $500K by the time I'm 57. I know that I could draw a $3000/Mo. straight life annuity at 57, but I'm not sure how much that would be reduced when I factor in the wife.

 

[Independent]

Great information, thanks! It's a good feeling knowing that if I lost my job today we would probably be okay. However,.. just to add a little "cushion", maybe I'll think about retiring at 57.

I would like opinions on another topic. Since my wife is 12 years younger than I am, would it be prudent for me to consider taking an annuity instead of the lump sum amount ($440K)? I believe this lump sum amount will be close to $500K by the time I'm 57. I know that I could draw a $3000/Mo. straight life annuity at 57, but I'm not sure how much that would be reduced when I factor in the wife.

That certainly brings up other questions. Are your VA and Army Reserve pensions single or joint?

It's always wise to consider the lump sum vs. single life vs. joint life options on a private pension. It's possible your employer is intentionally subsidizing one of them. Some people compare them to private SPIAs, others to the 4% SWR.

It's worthwhile to do the three scenario view of pensions plus SS - What's the income if 1) we're both alive, 2) only I'm alive, 3) only my spouse is alive.